Multinational corporations cause war

Shortly after the outbreak of the Israel-Hamas war and the beginning of the large-scale destruction of the Gaza Strip in October 2023, McDonald’s executives in Chicago became inadvertently involved in the conflict.

Local McDonald’s restaurant owners enjoy extensive autonomy over profits and operations, and franchisees began to take sides. Social media posts by McDonald’s in Israel referenced the provision of free meals to Israeli soldiers, after which McDonald’s outlets across the Middle East collectively pledged millions of dollars to support Palestinians in Gaza.

McDonald’s has since tried to minimize comments about its franchisees and maneuver its way through the controversy. In April 2024, McDonald’s Corporation announced it would buy back 225 of its restaurants from Alonyal Limited, the Israeli company that operates McDonald’s in the country, for an undisclosed amount.

The deal, which is expected to close over the next few months, will keep McDonald’s on its toes as it tries to reverse the decline in regional sales and share price caused by the scandal.

The incident shows how multinational corporations with global presence and decentralized operations can quickly lean toward supporting opposing sides in a conflict. While McDonald’s top executives had no intention of showing support for Israel or Palestine, sometimes profit interests have led companies to support multiple sides in a conflict, often in more meaningful ways.

In the Iran-Iraq War of 1980-1988, Western arms manufacturers supplied both sides with weapons directly and indirectly and benefited from the fluctuating support of Western governments for Iraq and Iran over the course of the conflict.

However, with increasing globalization and pressure on the US-led world order, multinational companies have expanded their international operations and are now faced with the challenge of maintaining business relationships both with the US and with countries hostile to American interests.

In addition, these companies are increasingly involved in directly or indirectly fuelling conflicts in other countries’ civil wars in ways that can prolong or escalate the violence.

The war in Ukraine has revealed that multinational corporations are increasingly unwilling to fully comply with the instructions of individual governments – including the United States – if these run counter to their financial interests.

Despite Russia’s annexation of Crimea and instigation of a proxy war in Ukraine’s Donbass region in 2014, numerous Western companies remained active in both countries, providing the Russian government with tax revenues, technological expertise, products and the knowledge of their employees, facilitating the Russian government’s efforts to support its war effort.

However, following Russia’s large-scale invasion of Ukraine in 2022, many Western companies faced the dilemma of either complying with sanctions by withdrawing from Russia or maintaining access to lucrative government contracts and a consumer market of 145 million people.

Yet while most of them left Russia due to public pressure and sanctions, other companies stayed in the country, citing high exit costs. Others that officially left Russia or declared their intention to do so continue to operate in Russia and have proven indispensable to the Kremlin’s ability to mitigate the impact of sanctions.

Meanwhile, even China, Russia’s main partner, has become the largest drone supplier to both Russia and Ukraine through its largest commercial drone company DJI, demonstrating the temptation of profits and how international markets enable the flow of goods to war zones regardless of geopolitical alliances.

As tensions between the West and China have also escalated in recent years, Western companies have faced increasing pressure to sever ties. US technology giants such as Google, IBM and Cisco have come under criticism for supporting the development of Chinese security capabilities, albeit ostensibly for domestic use.

In 2019, comments by NBA officials about China’s response to the pro-democracy protests in Hong Kong had a severe financial impact on the NBA’s operations in China and prompted a White House response criticizing companies that had “capitulated to the lure of Chinese money and markets.”

Yet Beijing continues to try to force foreign companies to take a different stance from their home governments on contentious issues, or at least to maintain neutrality. Many U.S. companies already generate more revenue in China than they do at home and are unwilling to ostracize the world’s second-largest economy and largest consumer market.

While multinational corporations have historically operated under US leadership during the past decades of neoliberal globalization, challenges to the US-led international order have caused many to rethink their positions.

This dynamic, coupled with globalized supply chains and markets, appears to have encouraged some multinational corporations to believe that they could support multiple sides in geopolitical disputes with relative impunity, while their products and services would find their way to their desired destinations and partners regardless of government instructions.

Rather than marching in lockstep with Washington, companies seem more willing to maintain their relationships with the United States while maintaining and expanding relationships with countries hostile to the United States.

This approach risks exacerbating geopolitical tensions and undermining the coherence of the US-led world order, as the profit motives of multinational corporations diverge from the foreign policy objectives of their respective governments.

Importantly, as globalisation has progressed, multinational corporations have become increasingly involved in civil wars and regions with fragile governance. In some cases, they have actively exacerbated tensions by supporting rebel groups and governments.

Chiquita Brands International S.à.rl, one of the world’s largest agricultural companies, admitted to paying money to both the FARC rebel group and right-wing paramilitary groups in Colombia in the 1990s and 2000s to ensure the security of its operations.

This practice of companies supporting multiple conflicting parties is particularly common in Africa – often to secure access to raw materials. In Nigeria, US companies Shell and Chevron have paid insurgent groups to protect their oil and gas interests, while providing tax and development funds to the Nigerian government.

Similarly, mining companies such as Afrimex (UK) Ltd. and Belgium-based Trademet SA have made payments to rebel groups active in the Democratic Republic of Congo (DRC) and are also collaborating with the DRC government.

Chinese mining companies are also said to have paid Nigerian militant groups for access to mineral reserves in the country while doing business with the Nigerian government.

In Myanmar, several Chinese and Thai companies are pursuing a dual approach: they officially contract with the military junta, but secretly cooperate with armed ethnic groups that control areas rich in natural resources.

In addition, mining, logging and agricultural companies paid “revolution taxes” to the New People’s Army (NPA) and other insurgent groups in the Philippines, including companies such as the Lepanto Consolidated Mining Company and the Philex Mining Corporation, which met with public disapproval from Philippine officials.

Meanwhile, engineering consulting firm Louis Berger Group paid the Taliban and other groups in Afghanistan to protect supply convoys and construction projects while also fulfilling contracts with the U.S. military.

Banks and payment processing networks also indirectly support or turn a blind eye to the financing of terrorist and criminal groups. The FinCEN Files, released in 2020, also revealed how banks like Britain’s Standard Chartered PLC processed millions of dollars for Arab Bank customers, even though Arab Bank was found guilty in 2014 of knowingly transferring money to Hamas.

The growing direct and indirect role of companies in conflict zones, particularly in regions with weak state enforcement, is also led by private military and security companies (PMSCs). These firms are often contracted by other private actors to protect investments and personnel, but by their nature tend to manage and prolong conflicts rather than resolve them.

PMSCs are particularly present in Africa, pursuing both private and state interests. The increasing use of PMSCs worldwide has raised concerns about the ability of multinational corporations to rapidly shift their support between conflicting parties as their strategic interests evolve, potentially playing a far more active role in fuelling and prolonging conflicts.

Of course, governments regularly support rival actors in conflict. This may be due to competing political camps, shifting interests, political expediency, economic motives, desperation, and the desire to promote instability.

In the Syrian civil war, Syrian rebels funded by the Pentagon fought against those supported by the CIA. At the same time, the Syrian government itself paid the Islamic State (IS) to buy back its stolen oil and natural gas, while supporting other rebel groups in the fight against IS.

But the danger that large corporations in conflict zones will increasingly support the various sides and divide up their own territories and spheres of influence among themselves is worrying. The same is true of the Dutch East India Company, which ruled its own territories with military force and trade monopolies.

While there are still dwindling expectations that multinational corporations will choose a clearer side in interstate conflicts, there seems little to stop them from fomenting and prolonging intrastate conflicts involving non-state actors as long as it serves their financial interests.

There is an urgent need for action to strengthen the regulation and accountability of PMSCs and multinational corporations operating in conflict areas, as their ability to influence conflict appears to continue to grow.

John P. Ruehl is an Australian-American journalist based in Washington DC and world affairs correspondent for the Independent Media Institute. He is an editor at Strategic Policy and the author of several other foreign policy publications. His book, Budget Superpower: How Russia is challenging the West with an economy smaller than Texas, was published in December 2022.

Republished with permission of the Independent Media Institute